CORPORATE CONDUCT: THE CANDIDATES

CORPORATE CONDUCT: THE CANDIDATES; A List Long on Candidates and 'No Thank You's'

By LESLIE WAYNE

Published: September 19, 2003

Correction Appended

For a job that was once valued at $140 million, finding a successor to Richard A. Grasso as chairman and chief executive of the New York Stock Exchange is not shaping up as an easy task.

Already, many of the gold-plated names bandied about have politely declined -- among them Robert E. Rubin, the former Treasury secretary; Donald B. Marron, the former chairman of PaineWebber; and Frank G. Zarb, the former chairman and chief executive of Nasdaq. Given the hybrid nature of the exchange -- it is both a regulator and a business -- and the scandal that swept out Mr. Grasso, filling the top job will hardly be an easy matter, many people say.

''It's going to be hard,'' said Richard H. Koppes, legal counsel to the California Public Employees Retirement System, or Calpers, the nation's largest public pension fund, which had called for Mr. Grasso's ouster. ''It's not good news that these good people have turned it down,'' Mr. Koppes added. ''You will need a good strong leader and someone who is willing to put themselves in the eye of the hurricane.''

Some say that Wall Street itself might provide that leadership, especially now that so many talented financiers might be on the market themselves, or tempted by the challenge presented at the exchange. The names of three top former Merrill Lynch executives -- Herbert M. Allison Jr., Daniel P. Tully and David H. Komansky -- were widely mentioned yesterday. But some say Wall Street is the wrong place to turn.

''The relationships are just too entangled,'' said Mel Weiss, a lawyer representing shareholders in class-action suits against major corporations. ''They all made a fortune on each other's largess. They have to get someone as pure as the driven snow, who has a history of public service, who has no affiliation to the industry and who the public will not recognize as subject to that kind of influence.''

For his part, Mr. Weiss, who has locked horns with Wall Street firms and corporate America, recommends former Senator Bob Kerrey of Nebraska, the president of New School University in New York, or Ralph Ferrara, former general counsel at the Securities and Exchange Commission. Other suggested names along those lines include Richard C. Breeden, a former chairman of the S.E.C., and Mary Schapiro, vice chairwoman of NASD.

As Mr. Rubin and Mr. Marron both indicated they were not interested, Mr. Zarb said that his years at Nasdaq made him a poor choice.

''I just think of it as a nonstarter,'' Mr. Zarb said. ''After all those years where Nasdaq was in fierce competition, it would not be a good situation. Everything I did would be looked at. The person needs to be free of that kind of baggage.''

Other names on various short lists include Arthur Levitt Jr., another former S.E.C. chairman; the financier Warren E. Buffett; and Robert R. Glauber, the chairman and chief executive of NASD. The ideal candidate, many say, is someone who can understand the dynamics of the market, be able to deal with Washington regulators and lawmakers, have credibility with Wall Street broker-dealers and possess enough media expertise to operate in the public arena.

In addition, the new head will have to be a Mr. Fix-It, restoring the exchange's luster and ridding it of a perception that it is a monopoly game for insiders, the specialist firms that execute investors' orders on the Big Board's trading floor.

Robert Monks, a shareholder advocate, said the current situation presented a ''real opportunity'' to address many problems.

''Picking the right person depends on the extent of the appetite to consider what is the appropriate role of the exchange,'' said Mr. Monks, co-author of ''Thin on Top -- Why Corporate Governance Matters and How to Measure, Manage and Improve Board Performance'' (Nicholas Brealey, 2003). ''Some really think it is a skimming operation run for the benefit of the specialists, and this can be an opportunity to address that. There have been doors that are now open that no one thought would be opened.''

Some advocate splitting the top job at the exchange -- or the exchange itself. Roy Smith, a finance professor at the Stern School of Business of New York University, suggested that the chief executive job be split in two -- one person overseeing operations, the other representing the exchange's public face.

''The guy you'd really like to replace Grasso is Grasso himself,'' said Mr. Smith, a former Goldman Sachs partner. ''He had been the most effective executive the exchange had seen in a long time. You need someone who knows enough about markets and technology and is young enough to be with it. Then you also need someone who is senior and has a public persona.''

Sarah A. B. Teslik, executive director of the Council of Institutional Investors, went further and suggested that the question of Mr. Grasso's successor could be easily solved if the exchange itself split, in the same way that Nasdaq did -- into a regulatory arm and another that handles the business side.

''I think they have to be creative,'' said Ms. Teslik, whose nonprofit organization issued a report last July critical of the exchange and the lack of disclosure about Mr. Grasso's pay package. ''If you separate out the regulatory part, that would call for one type of person who would work to protect investors. Then, for the business side, it could be whomever the broker-dealers want.''

Photos: People who have been mentioned for the top job at the New York Stock Exchange include Mary Schapiro, left, vice chairwoman of NASD; Arthur Levitt Jr., center, a former chairman of the S.E.C.; and former Senator Bob Kerrey of Nebraska, the president of New School University in New York. (Photo by Associated Press); (Photo by Bloomberg News); (Photo by Bloomberg News)(pg. C5); H. Carl McCall, right, the interim chairman of the Big Board, said yesterday that the committee on corporate governance would make recommendations to the full board on Oct. 2. Robert G. Britz and Catherine R. Kinney are acting co-presidents. Page C5. (Photo by Chester Higgins Jr./The New York Times)(pg. C1)

Correction: September 20, 2003, Saturday A picture caption in Business Day yesterday with an article about potential successors to Richard A. Grasso as chairman and chief executive of the New York Stock Exchange misstated the titles of two exchange executives, Robert G. Britz and Catherine R. Kinney. They are co-presidents, not acting co-presidents.